Dáil Éireann debate -
Thursday, 15 Feb 1996

Vol. 461 No. 6

Adjournment Debate. - Price of UK Magazines on Irish Market.

Mrs. O'Rourke

I call on the Minister of State, Deputy Rabbitte, to order an immediate investigation into the companies responsible for the distribution of books, recorded music and magazines in the Republic. Approximately two weeks ago the Minister, Deputy Bruton, replied to my colleague, Deputy Dermot Ahern, as follows:

In respect of magazines, I have asked the Director of Consumer Affairs, if, in his view, it is necessary to carry out a survey to establish the extent to which price reductions resulting from the appreciation of the punt have been passed on to consumers.

That was extremely mild. I sought permission to raise this matter on the Adjournment because of the number of people who have contacted me from all over the country to complain about the exorbitant cost of UK magazines and the failure to pass on the benefits resulting from the current favourable exchange rate of the punt. If the reverse was true, the additional costs would be passed on immediately by way of price increases.

For the past 18 months the punt has been worth significantly more than sterling. As a consequence, one would expect goods imported from Britain to be cheaper, but this is not the case. Irish consumers are being fleeced by the distribution companies which operate a virtual cartel.

Business and Finance has highlighted many examples to show that the savings accruing from the weakness of sterling are not being passed on to consumers. This merits investigation. For many months the exchange rate of the punt has been approximately £1.03 sterling and we are told it will be higher during the year. Books which cost £20 in Britain should cost about £19.33 here. However, because the benefits are not being passed most bookshops are charging more.

This daylight robbery is particularly obvious when it comes to the price of magazines and recorded music. Even when higher Irish VAT rates are taken into account, the cost of UK magazines in the Republic is between 10 and 20 per cent higher than it should be. For example, Business Week has a recommended British cover price of £2. Taking the appropriate factors into account, this should translate into a cover price of £2.17 in the Irish marketplace, but a price of £2.59 is being charged.

Purchasers of tapes and compact discs are also being fleeced with Business and Finance calculating that, when VAT and exchange rates are taken into account, Irish consumers should be getting recorded music from Britain at a 1 per cent discount. Instead there is a markup of between 3 and 8 per cent.

I call for an immediate investigation into the companies responsible for the distribution of recorded music, books and magazines. Eason's and Newspread, the two companies which distribute magazines, have serious questions to answer about the pricing policy they set for newsagents. They operate a virtual cartel and deserve to be investigated.

The investigation by the Director of Consumer Affairs must take into account the consistent weakness of sterling during the past 14 months. The companies mentioned should not be allowed get away with the excuse that they are covering future price increases. they should be forced to compensate consumers for the overcharging during that period.

There is a range of specialist magazines dealing with such topics as health and beauty issues, DIY — including carpentry, construction, gardening and mechanical engineering — and computers. It appears that the companies in question have decided that it does not matter to the person who buys these magazines whether they pay £4.50 or £5, but that is not the point. They may well be able to afford to pay the extra 50p, but why should they?

When Minister of State at the Department of Enterprise and Employment I took up this issue. The Minister of State may recall that in 1992 there was a currency crisis which, thankfully, did not last very long. When I met the representatives of one of the companies in question, they informed me that I did not understand what was a very complicated matter, as if I would not be able to comprehend it. They explained that they had to buy in advance, but 14 months have passed without any of the benefits being passed on to the consumer.

The Minister was far too timid in asking the Director of Consumer Affairs "if, in his view it is necessary to carry out a survey". I ask the Minister of State to take heed of what I am saying and to order the director to conduct such a survey and publish the results so that the public will see where the profits went during the past 14 months.

Minister of State at the Department of Enterprise and Employment (Mr. Rabbitte)

The distribution of magazines and newspapers in Ireland is controlled by two firms — Eason and Newspread, Eason has some 70 per cent of the market. Both firms apply a formula for the pricing of foreign magazines which was recommended by the National Prices Commission in 1983. The Irish selling price is calculated as follows: sterling cover price at the rate of exchange of purchased currency, plus 5 per cent uplift, plus VAT.

In 1990 the formula was altered. Contact was made with the Department at that time and approval was sought for the new formula but while this was not forthcoming it appears that Eason and Newspread applied the new formula anyway. In the course of its examination of this matter, the Department of Enterprise and Employment became aware of certain arrangements between Eason and Newspread which effectively ensured that magazines sold by both firms were sold at the same price. This was, of course, before the passing of the Competition Act, 1991, which prohibited all anti-competitive practices.

In general, the price differential between UK-Ireland magazine prices arises from the currency differentials between the punt and sterling; the 21 per cent VAT applied here but not in the UK and the distribution charges imposed by the importers. In regard to the currency differentials, while the director has expressed concern that consumers would benefit from the increased value of the punt, it is not within his powers to compel distributors or retailers to reduce their prices in line with currency movements. The director is keeping the matter under review.

In the course of a survey in 1992 by the Director of Consumer Affairs the following practices have been admitted to by Eason and Newspread. When Eason, which is the dominant player in the market, is about to make a deal in relation to the forward price of sterling it notifies its only competitor. Newspread admits that it attempts to make a deal for forward sterling purchase at or about the same time as Eason — there is evidence that this is the case. Both firms use currency conversion charts which allow newsagents to convert from UK cover prices to Irish prices by the use of the formula mentioned above. In order to enable the situation with regard to imported magazines and newspapers to be fully examined the Minister could commence an inquiry under section 22F of the Prices Act, 1958, as amended. This would enable the question of margins, etc. to be investigated with full legal authority to demand answers, papers, etc.

In 1992 Eason notified this practice to the Competition Authority. The matter was investigated by the Competition Authority in 1992-93. The Competition Authority took the view that there was a practice by Eason and Newspread that amounted to an anti-competitive practice.

The companies went to the High Court to stop the Competition Authority investigation. When the case was over the companies withdrew the notification of agreement that had prompted the Competition Authority investigation. There is no agreement now before the Authority. The Authority published its prospective findings in its 1993 annual report as a separate appendix. In that regard I refer the Deputy to Paragraphs 36 and 47 of the Competition Authority Report, 1993, particularly Annex 5. This may strike the Deputy and other Members as an unusual decision by the Competition Authority. The Authority will, when the amendment Bill is enacted, have wide new powers that will enable it to initiate investigations into issues such as these.

In 1993 when the Authority was about to take a decision on the matter Eason obtained an injunction preventing it from so doing. Subsequently, when after an oral hearing, the Authority was about to take a decision — believed to be unfavourable to Eason — Eason withdrew the notification.

I take responsibility for the circumspect language of the earlier reply to the Deputy. It is in keeping with my timid and tepid personality that it was so circumspect. However, I can confirm that the Director of Consumer Affairs has commenced the investigation into the prices of magazines in Ireland and I will let the Deputy know the outcome as soon as it is presented to me.

Mrs. O'Rourke

Will it be published?

Mr. Rabbitte

It is my intention to publish it.

The Dáil adjourned at 5.35 p.m. until 2.30 p.m. on Tuesday, 20 February 1996.